Property market ‘sluggish’ after tax jump

Interest in Yangon’s high-end property market has vanished in the wake of the August 11 tax increase, say real estate agents. Photo: Myanmar Times Archive

The axing of a five-year-long tax holiday related to property sales has significantly decreased activity in the real estate market, agents said last week.

On August 11, the government upped the income tax payable on property purchases to 30 percent, from 8pc, for buyers who did not disclose their incomes.

Ko Soe Wunna, the manager of Shining Star real estate agency in Ahlone township, said the buying and selling market had been cool even before news spread of the ending of the tax holiday.

“We’ve seen demand dropping since July, when rumours of the impending tax increase started circulating,” he said. “I don’t think the tax increase has done any good for the industry – and property prices have not decreased at all,” he added.

“I think at least half of the transactions we’ve seen in the past three months involve properties that will be used for commercial reasons,” he said.

However, the tax holiday also coincided with Buddhist lent, which runs from July 3 to October 30 this year, a period when many Buddhists avoid moving house.

“Hopefully the market will recover in Thadingyut at the end of October,” he said.

Ko Soe Wunna said his company’s transactions between July and mid-September this year had fallen by 70pc year-on-year with 2011.

He said demand for high-end properties – those priced above K500 million – was almost nonexistent because traders did not believe that they could make safe profits from buying and selling them.

“Potential buyers have to think very carefully about purchases now [if they cannot prove their income] because the income tax of 30pc, plus the 7pc stamp duty, is a lot of money. Since the tax holiday was ended we’ve only handled sales of properties worth less than K500 million,” he added.

Daw Cho Cho, a freelance broker at Yankin township, described the property market as “sluggish” in the wake of the tax increase.

“Nobody wants to pay 37pc tax when they’re buying a house – this is a major cost,” she said.

“Property prices are the highest I’ve ever seen them. And traders are no longer interested in such properties because if they are forced to pay the tax they will make no profit when they sell the property,” she said.

Daw Cho Cho added that traders were also having to hold onto properties for longer periods in order to find buyers. Daw Cho Cho said she hoped to see market activity bounce back at the end of October but was not confident that it would.

“There’s a good chance that demand will continue to fall in the coming months,” she said.

U Sai Khung Noung, the managing director of Sai Khung Noung Real Estate & Law Firm in Thingangyun township, said there is no interest in high-end properties.

“We’re only seeing sales activity in properties that cost from K100 million to K200 million, mostly plots of land on Yangon’s outskirts,” he said.

“Now the foreign investment law has been passed by parliament I think some buyers are waiting to see how the government will handle the high land prices, especially for industrial land,” he said.

“I think 37pc is too high for buyers and 25pc would be a lot better for the industry,” he said.